Bottom Line

Putting an end to asbestos litigation "double dipping"
Feb. 26, 2015

You’ve likely seen the ads on T.V. Attorneys telling viewers that if they have some particular illness, that they might have been exposed to asbestos and are entitled to financial compensation.

Asbestos is a mineral that was once used regularly in industrial applications like building insulation and fireproofing. It was also commonly used in settings such as naval shipyards. However its use worldwide was either banned outright or severely limited when it was discovered that prolonged inhalation could lead to serious illnesses. Litigation over its use has become the most expensive mass tort in U.S. history.

Asbestos litigation is big business for the trial bar, but misrepresentations and inconsistencies are common.

A major concern for the business community is the “double dipping” of claims in both civil litigation and the trusts that have been established for these individuals suffering asbestos related illnesses.

Asbestos bankruptcy trusts are personal injury settlement trusts that are created by defendant companies through federal bankruptcy law. These specific trusts are designed to address a defendant’s present and future asbestos-related liabilities. Currently, 60 bankrupt companies have created these trusts to compensate for present and future claimants for alleged asbestos-related injuries. Collectively, these trusts manage over $36 billion and distribute billions of dollars to over 100,000 claimants each year. As an example, in 2010 these trusts paid $3 billion to over 460,000 claimants.

This has an economic impact on our state and it also threatens the reserve for future victims as funds are depleted more quickly as they are dispersed to the same person more than once or they are awarded to individuals with fraudulent claims.

Here at a state level, Rep. Sonny Borrelli has introduced legislation to insert more transparency into asbestos litigation. His H.B. 2603 would require plaintiffs in asbestos suits to file their trust claims before proceeding to trial. This simple change would discourage fraud and prevent abusive double dipping. Similar laws have been passed in Ohio, Oklahoma, and Wisconsin and Rep. Borrelli is committed to seeing the legislation through to passage here.

His bill would cut down on payments of duplicate and fraudulent claims by requiring these asbestos bankruptcy trusts to make the identifying details on individual claimants available before the trial. This has been a problem for different companies for years as many plaintiffs’ attorneys have gamed the system by filing claims in the courts and in multiple trusts on behalf of the same victim.

Earlier this year in Congress, the FACT (Furthering Asbestos Claim Transparency) Act was introduced, a bill requiring asbestos trusts in the United States to file quarterly reports detailing the specific payouts that they made and who received them. Ariz. Sen. Jeff Flake has introduced the Senate version of the bill. The goal of these reports and requirement was to prevent claimants from filing for the same injury with more than one of the asbestos trusts. The U.S Chamber of Commerce has strongly supported litigation transparency at a national level, expressing its concern about the abuse of the trust funds and the existing fraud.

The current asbestos litigation environment is unfair. The trial bar is denying businesses an opportunity to fully and fairly defend themselves in court by filing trust claims after the lawsuits have concluded and therefore hindering access to the exposure information that is presented to the trusts.

This lack of transparency hurts Arizona companies, their shareholders, employees, and the communities that they operate in. Every time a company is forced to pay more than its fair share in an asbestos case, it is left with less money to invest in its future and in Arizona’s economy.

And this isn’t just a tort reform issue. This issue affects taxpayers, too.

Cities find themselves as the targets of plaintiffs’ attorneys who represent former employees who claim they were exposed to asbestos on construction projects or in other industrial settings. But as is unfortunately often the case in asbestos claims, the plaintiffs’ attorneys aren’t forthcoming with information indicating whether their clients also filed trust claims. And since the exposure to asbestos was often decades ago, the insurance companies contracted by the cities aren’t always still in business, further shifting costs onto cities. One of the law firms involved in asbestos litigation is currently suing the city of Phoenix. These cases are hugely expensive, diverting taxpayer dollars away from core city services.

The American Tort Reform Association ranks New York City Asbestos Litigation (NYCAL) as the nation’s number 1 Judicial Hellhole, an area so rife with corruption that it brought down New York’s speaker of the house. This is not a Top 10 list we want to appear on.

Asbestos litigation reform is the next step in Arizona’s efforts to create a legal environment known for transparency, predictability and fairness to all parties. Passage of H.B. 2603 is the right move.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry.

The Arizona Chamber of Commerce and Industry is committed to advancing Arizona's competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans. http://www.azchamber.com/.